INTRODUCTION
There are specific provisions under GST laws
on Scrutiny and Audit, both of which are different.
There are fundamental
differences in the three terms – reconciliation, scrutiny and audit. The scope
of audit would include the first two which aid in conduct of audit.
The purpose of preliminary
scrutiny of returns includes:
ensuring the completeness of the information
furnished in the return,
arithmetic correctness of the amount computed
as tax and its timely payment,
timely submission of the return and
identification of non-filers and stop-filers.
Scrutiny of documents viz.
ledger accounts, returns of tax, compliances etc is nothing but a strong
compliance verification procedure or mechanism. For example, in case of a
return, the purpose of detailed scrutiny of returns is to ensure the
correctness of the assessment made by the assessee. Such scrutiny plan only
supplement the audit programme. It is expected that for an effective scrutiny,
it shall follow best audit practices.
The scope of audit, on the
other hand, is to inspect the financial records of a company for a complete
financial year in order to identify non-compliance issues and to evaluate the
assessee’s internal control system. The two processes of audit and scrutiny
are, in fact, complementary to each other.
Simply put, auditing is an
examination or verification of books of accounts and financial records so as to
arrive at truth and fairness of such statements. It is that branch of accounts
that deals with the examination and verification of accounts or books based on
evidence, procedures and principles of auditing.
Statutory Provision
Section 61 of
the GST Act, 2017 authorizes the proper officer to scrutinize
the return for verification of correctness of the return and if any
discrepancies are noticed by the officer, then, he shall inform about the same
to the taxable person. Where the explanation regarding such discrepancies are
found acceptable, then, no further action shall be taken against the assessee
but where no explanation is furnished or the explanation furnished is not
satisfactory within thirty days of being informed by the proper officer, the proper
officer may initiate appropriate action against such taxable person.
Notice of scrutiny of returns
As per sub
rule (1) of rule 99 of the GST Rules, 2017 where any
return furnished by a registered person is selected for scrutiny, the proper
officer shall scrutinize the same in accordance with the provisions of Section 61 with
reference to the information available with him, and in case of any
discrepancy, he shall issue a notice to the said person in FORM GST
ASMT-10, informing him of such discrepancy and seeking his explanation
thereto within such time, not exceeding thirty days from the date of service of
the notice or such further period as may be permitted by him and also, where
possible, quantifying the amount of tax, interest and any other amount payable
in relation to such discrepancy.
Consequences of not providing an explanation against scrutiny
As per Section 61(3) of
the GST Act, 2017 in case no satisfactory explanation is
furnished regarding the discrepancies found by proper officer within a period
of thirty days of being informed by the proper officer or such further period
as may be permitted by him or where the registered person, after accepting the
discrepancies, fails to take the corrective measure in his return for the month
in which the discrepancy is accepted, the proper officer may initiate
appropriate action including those under Section 65 or Section
66 or Section 67,or proceed to determine the tax and other dues
under Section 73 or Section 74.
Essential ingredients of scrutiny
According to Section 61 of
the GST Act, 2017 relating to scrutiny of returns:
scrutiny shall be done by the proper officer;
scrutiny shall be done of return and related
particulars furnished by taxable person;
purpose of such scrutiny shall be to verify
the correction of return;
manner of scrutiny of return as prescribed
under Rule 99
proper officer shall inform the taxable
person (assessee) about the discrepancies noticed during the course of
scrutiny;
by such intimation, explanation is sought
from the assessee;
where explanation furnished by assessee is
found acceptable, no further action shall be required and assessee be informed
accordingly.
Manner of dealing with discrepancies
As per rule 99 of
the GST Rules, 2017, discrepancies shall be dealt with as under:
(a) The registered
person may accept the discrepancy mentioned in the notice issued under
sub-rule (1), and pay the tax, interest and any other amount arising from
such discrepancy and inform the same or furnish an explanation for the
discrepancy in FORM GST ASMT-11 to the proper officer.
(b) Where the
explanation furnished by the registered person or the information submitted
under sub-rule (2) is found to be acceptable, the proper officer shall
inform him accordingly in FORM GST ASMT-12.
Situation when no further action can be taken
According to Section 61(2) of
the GST Act, 2017 where the explanation given by the tax payer
in response to discrepancies informed by the proper officer, is found
acceptable, the taxable person shall be informed accordingly and no further
action shall be taken in this regard by the proper officer.
Actions for non-compliance
According to Section 61(3) of
the GST Act, 2017 where –
no explanation is furnished, or
explanation furnished is not found
satisfactory, or
taxable person fails to take corrective
action/measures after accepting the discrepancies, proper officer may initiate appropriate
action against such taxable person which may include
audit by tax authorities under Section 65
special audit under Section 66
inspection, search or seizure under Section 67
proceed to determine tax and other dues
under Section 79 providing for recovery of dues.
